Question

The unadjusted trial balance of Sketch Star Makers Inc., prepared as of December 31, 2018, includes the following account balances. All of the accounts listed have normal balances. Cash$18,500 Accounts Receivable 3,700 Supplies 4,400 Prepaid Insurance 8,200 Equipment 27,000 Accumulated Depreciation 3,700 Notes Payable (long-term) 37,000 Deferred Revenue 13,500 Service Revenue 47,000 Salaries and Wages Expense 38,500 The following information is also available: A) A count of supplies revealed $2,100 worth on hand at December 31, 2018. B) An insurance policy, purchased on January 1, 2018, covers five years. C) The equipment depreciates at a rate of $2,700 per year; no depreciation has been recorded for 2018. D) One half (or 50%) of the amount recorded as Deferred Revenue remains deferred as of December 31, 2018. E) The accrued amount of salaries and wages at December 31, 2018 is $3,700. Required: Prepare the required adjustments for the company as of December 31, 2018

Answer 1

Answer:

A) A count of supplies revealed $2,100 worth on hand at December 31, 2018.

Dr Supplies expense 2,300

    Cr Supplies 2,300

B) An insurance policy, purchased on January 1, 2018, covers five years.

Dr Insurance expense 1,640

    Cr Prepaid insurance 1,640

C) The equipment depreciates at a rate of $2,700 per year; no depreciation has been recorded for 2018.

Dr Depreciation expense 2,700

    Cr Accumulated depreciation, equipment 2,700

D) One half (or 50%) of the amount recorded as Deferred Revenue remains deferred as of December 31, 2018.

Dr Deferred revenue 6,750

    Cr Service revenue6,750

E) The accrued amount of salaries and wages at December 31, 2018 is $3,700.

Dr Wages expense 3,700

    Cr Wages payable 3,700